East Devon Area Profile Produced for Devon County Council February 2014
East Devon Area Profile
Produced for Devon County Council
February 2014
East Devon Area Profile
TABLE OF CONTENTS EAST DEVON IN SUMMARY...... 1
1 INTRODUCTION ...... 2
2 THE EAST DEVON LABOUR MARKET ...... 4
3 CURRENT ECONOMIC PERFORMANCE ...... 7
4 ECONOMIC FORECASTS ...... 14
5 WHAT ARE THE IMPLICATIONS FOR EAST DEVON? ...... 19
ANNEX 1: SUMMARY TABLE DATA SOURCES ...... 21
2 East Devon Area Profile
East Devon in Summary CONTRIBUTION TO THE DEVON ECONOMY East Devon is Devon’s largest district in population terms, and second largest in employment terms . It benefits from its proximity and links with Exeter, including the Exeter and East Devon Growth Point. East Devon’s projects in the Growth Point include the Flybe Training Academy and the Clyst Honiton bypass. The environmental assets of the district, including two areas of Outstanding Natural Beauty and the Jurassic Coastline world heritage site make East Devon attractive to tourists; tourism-related sectors are well-represented. The district also benefits from the presence of Exeter International Airport, a regional asset reflected in East Devon’s employment specialism in air transport. Indicator 2012 % of Devon Employment 42,800 15% Businesses 5,395 18% Real Value Added £1681m 14% Population 134,400 18% LABOUR MARKET Indicator Key Points Latest Position Employment Rate Exceeds the national average Highest employment rate in Devon (linked to low unemployment 78.1% levels) Unemployment Rate Below the national average 2.7% Lowest unemployment rate in Devon Inactivity Rate Lower than the national average 19.8% Fourth lowest inactivity rate in Devon NVQ L2+ Skills profile exceeds the national average from NVQ L1 to L3 82.4% Fifth highest proportion qualified to NVQ4+ in Devon, in line with NVQ L4+ national average 34.2% CURRENT ECONOMIC PERFORMANCE Indicator Key Points Latest Position Employment Density Small employment base relative to size of working age population – density lags behind national average 57,192 per 100,000 w orking age residents Fourth highest in Devon Business Density Business density exceeds the national average 72 per 1,000 w orking Second highest business density in Devon after South Hams age residents High 3 year survival rates and average start up rate Productivity Equivalent to 80% of the national average £30,562 per Fourth lowest productivity levels in Devon employee Highly Skilled Highly represented due to high numbers of managers and Occupations particularly professionals 48% Administrative and secretarial and caring and leisure occupations are highly represented Average Annual Lower than resident based earnings in North Devon £19,241 Workplace Earnings Both workplace and resident earnings lower than national average ECONOMIC FORECASTS % Change 2013- Indicator Key Points 2025 Employment Highest proportionate increase in Devon exceeding national average +5,900 / 10.7 Driven by construction, accommodation and food and business and finance Real Value Added Third highest proportionate increase in Devon, exceeding national average + £523m / 31.0% Growth balanced across a number of sectors Productivity One of three districts where relative productivity is forecast to remain static +18.3% Forecast to be equivalent to 80% of national average by 2025 See Annex 1 for data sources
1 East Devon Area Profile
1 Introduction
1.1 In both the UK and the wider global economy, there are signs of economic recovery and a renewed focus on growth is beginning to emerge. Across England, new plans for economic and social development are taking shape in local areas to help secure funding and/or inform how it will be deployed (for example, through the 2014-2020 Structural and Investment Funds and Strategic Economic Plans, both of which are being planned at a Local Enterprise Partnership level). Understanding current economic conditions and the future prospects of local economies can support this process.
The East Devon Area Profile
1.2 This report provides a profile of East Devon, which has been produced on behalf of Devon county Council as part of their function to provide economic intelligence across the county, to inform local economic development plans. The report draws upon standard datasets and Cambridge Econometrics’ Local Economy Forecasts Model (LEFM) to set out the district’s contribution to the Devon economy, how the economy currently performs and headline economic forecasts relating to employment, added value and productivity.
Introducing East Devon 1.3 East Devon is the sixth largest local authority area in Devon, located on the boundary with South Somerset and West Dorset, and covering an area 823,732m2. The district boasts exceptional environmental assets including two Areas of Outstanding Natural Beauty (AONB) and the Jurassic Coastline world heritage site which runs the length of the district’s southern border. East Devon also contains the main airport for the south west – Exeter International Airport – located in the west of the district, providing linkages to a range of UK (including Edinburgh, Belfast and Manchester) and European destinations (including Paris, Geneva, and Amsterdam).
A Varied Geography 1.4 East Devon’s geography is varied, ranging from urban fringe on the edge of Exeter, to smaller seaside, market towns, and villages. The district is officially classified as ‘Rural 50’, with at least 50%, but less than 80 per cent of the population living in rural settlements and larger market towns1. The large majority of land in East Devon (91%) is classified as green space, accounting for 748,938m2 of its total area. As such, the district has a low population density of 1.7 persons per hectare, compared to the England average of 4.1. Of the district’s 68 parishes, just four have a population density above this average. 1.5 There are ten parishes in East Devon with population levels exceeding 3,000 people (Axminster, Broadclyst, Budleigh Salterton, Colyton, Exmouth, Honiton, Ottery St Mary, Seaton, Sidmouth and Woodbury) the largest of which are the coastal resorts of Exmouth and Sidmouth, and the rural inland settlement of Honiton: Exmouth: With a population of almost 36,000, Exmouth is the largest urban area within East Devon. The town’s seafront, expansive sandy beaches, and estuary location make it a popular seasonal visitor destination. Sidmouth: Located to the east of Exmouth, and 15 miles south east of Exeter, Sidmouth is the second largest conurbation in the district with a population of just over 14,000, which is swelled by year round tourism. The town has rich architectural value, with large parts designated as a conservation area, and has become a popular location to both visit and live. Honiton: The market town of Honiton is the third largest of East Devon’s towns, with a population of just over 11,600. The town is situated at the junction of the A35, A30, and A373 roads and acts as centre for shopping, employment and services for the surrounding rural areas.
1 Defra (2011) Local Authority Rural-Urban Classification
2 East Devon Area Profile
1.6 Significantly, the ‘West End’ of the district is part of the Exeter and East Devon Growth Point – a public and private sector partnership to support sustainable economic growth over the next 20 years. The development programme will result in additional jobs and the diversification of the local employment base, as well as new homes and the creation of new communities.
A Well Connected District with a Large Commuter Population 1.7 Despite its rural nature, the district is relatively well connected. The A30/A303 provides the main access route out of the district to South Somerset and West Dorset as well as London and the South East, whilst the M5 provides access to London and the north of the county, via Exeter. London can be reached in about three hours by road. In terms of rail, a commuter line links Exmouth to Exeter, whilst a mainline rail service provides regular links to London. 1.8 Commuter flows are a key aspect of East Devon’s spatial economy. The Annual Population Survey indicated a commuting outflow of 19,037, and inflow of 6,448 in 2012, providing a net flow of workers out of the district of 12,589. The largest proportion of all out- commuters went to Exeter, followed by West Dorset and South Somerset.
Report Structure
1.9 The remainder of the report is structured as follows: Chapter 2 sets out the current structure and activity of East Devon’s Labour Market. Chapter 3 sets out the current economic performance of the East Devon business and employment base. Chapter 4 sets out economic forecasts for the district. Chapter 5 summarises the key messages and implications of current and future trends for economic development in East Devon.
3 East Devon Area Profile
2 The East Devon Labour Market
Key Messages East Devon is the county’s largest district in population terms, offering residents a choice of both urban and varied rural locations. The district has a very small working age population in relative terms and benefits from an exceptionally high employment rate driven by low levels of unemployment. The employment rate is primarily supported by high levels of out-commuting (rather than a high employment density within East Devon) as well as high levels of self employment. East Devon has a skilled (but not highly skilled) population. A high proportion of working age residents hold qualifications. Although this is weighted towards NVQ Levels 1 to 3, rather than NVQ L4+, where performance is in line with the county-wide and national average. East Devon’s performance against each of the key indicators covered in this chapter is summarised in the table below.
Performance against Indicator East Devon Devon England national average Employment Rate % of working 78.1% 75.9% 71.4% Source: Annual age population Population Survey, Mid- year Population Estimates
Unemployment % of Rate economically Source: Annual active 2.7% 4.5% 7.9% Population Survey, Mid- population year Population Estimates Inactivity Rate % of working Source: Annual 19.8% 21.0% 22.4% Population Survey, Mid- age population year Population Estimates NVQ L2+ % of working Source: Annual 82.4% 77.3% 71.8% Population Survey, Mid- age population year Population Estimates NVQ L4+ % of working 34.2% 34.9% 34.2% Source: Annual age population Population Survey, Mid- year Population Estimates
Population 2.1 East Devon is the county’s largest district in population terms. In 2012, the district was home to 134,400 residents, accounting for 18% of Devon’s total population. The area has a mixed rural-urban profile, with just over half of the population living in rural areas. Across East Devon, the rural areas consist of rural town and fringe, rural villages and rural hamlets and isolated dwellings.
4 East Devon Area Profile
Urban-rural split, 2012
Source: Mid-year Population Estimates, 2011 Census
Age Profile 2.2 With just 60% of residents age 16-64, Devon has a small working age population and, in relative terms, it is even smaller in East Devon where just 56% of the population are of working age. In contrast, there are a high number of residents age 65+, reflecting the large population of those who are retired in East Devon. Age Profile of the Population, 2012 No. % Devon (%) England (%) Under 16s 20,800 15.5 16.4 18.9 Age 16-64 74,900 55.7 60.1 64.1 Over 65+ 38,700 28.8 23.4 16.9 Source: Mid Year Population Survey
Economic Activity 2.3 The latest data from the Annual Population Survey 2 highlights the exceptionally high employment rate in East Devon, the highest in the county at 78%. This reflects particularly low levels of unemployment, at just 3%, as well as inactivity rates which are lower than the county-wide and national average. 2.4 The high employment rate is also supported by high levels of out-commuting (rather than a high employment density within East Devon) and high levels of self employment. East Devon has the third highest level of self employment exceeding both the county-wide (16.5%) and the national average (19.6%). Profile of the Working Age Population 2012/13 No. % Devon (%) England (%) Employment rate 56,400 78.1 75.9 71.4 Unemployment rate 1,500 2.7 4.3 7.9 Inactivity rate 14,300 19.8 21.0 22.4 Source: Annual Population Survey
2 Data covers period October 2012 to September 2012
5 East Devon Area Profile
2.5 Where residents are economically inactive, the primary reason is retirement. This accounts for third of the economically inactive population, with a further third looking after a family or home. The remainder are students, long-term sick or have other reasons for inactivity.
Skills 2.6 East Devon has a skilled (but not highly skilled) population. In line with the county- wide profile, a high proportion of the working age residents in East Devon hold qualifications, although this is slightly weighted towards NVQ Levels 1 to 3, rather than NVQ Level 4+. In terms of the proportion of the working age population qualified to NVQ4+, East Devon ranks fifth out of the eight districts in the county. Qualifications of the Working Age Population, 2012
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% NVQ 1+ NVQ 2+ NVQ 3+ NVQ 4+ No Qualifications
East Devon Devon England
Source: Annual Population Survey
6 East Devon Area Profile
3 Current Economic Performance
Key Messages As the county’s second largest district in employment terms, East Devon performs strongly on a number of indicators. The district has a large and established business base, with the second highest business density in Devon, strong business survival rates and in the context of Devon, one of the highest start up rates. Employment specialisms include accommodation and food and construction reflecting the popularity of the district with tourists and the level of development taking place. Agricultural employment is also highly represented. Productivity continues to be an issue for the district, with the level of value added generated per employee equivalent at just 80% of the regional average – the district also has the third lowest productivity level in Devon. Further, despite East Devon being the highest performing district in terms of highly skilled occupations and one of only two districts to exceed the national average, this does not translate into above average wages. Annual average workplace earnings in East Devon are just 87% of the national level, and on average, residents who travel outside the area for work have higher earnings that people working locally. East Devon’s performance against each of the key indicators covered in this chapter is summarised in the table below.
Performance against Indicator East Devon Devon England/UK national average
Employment Employees per density 100,000 64,799 67,699 84% working age 57,192 Source: BRES, Mid-year residents Population Estimates
Business density Businesses per 1,000 Source: Business working age 72 67 60 120% Demography, Mid-year Population Estimates residents
Productivity Real Value Added per £30,562 £31,897 £38,293 80% Employee Source: LEFM
Highly Skilled Top 3 Occupations occupational groups as % of 48% 38% 45% Source: Annual all occupations Population Survey Average workplace Average gross earnings annual £19,241 £19,091 £22,199 87% earnings Source: ASHE
7 East Devon Area Profile
Employment 3.1 East Devon is the county’s second largest district in employment terms. In 2012, there were over 42,800 employees, accounting for 15% of total employment in Devon. 3.2 Despite the overall scale of the employment base, East Devon has a lower number of jobs for every 100,000 working age residents (approximately 57,000) than three other districts in Devon. The employment density is also lower than the average for the South West and England, and almost 8,000 additional jobs would need to be created to reach national levels (an uplift of 14%). Employment Density, 2012 – Employees per 100,000 working age residents 80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
- England South West Devon East Devon
Source: Business Register and Employment Survey, Mid-year Population Estimates 3.3 Mirroring the employment profile of the county, the largest employment sectors in East Devon are wholesale & retail, health & social work and accommodation and food, which collectively account for 45% of total employment. 3.4 In two of these sectors – accommodation and food and wholesale and retail – East Devon’s share of employment in the county’s sector (18% and 16% respectively, is higher than its share of total employment in Devon (15%). East Devon also makes a significant contribution to employment in Devon’s transport and storage (25%), construction (20%) and other services (19%) sectors. 3.5 A location quotient (LQ) provides an indication of how highly represented a sector is within the employment base of a geographic area compared to the national level. A LQ of one indicates that employment in the sector is equivalent to the national level, while a sector with an LQ of more than one denotes a high level of representation and specialisation. A LQ of less than one highlights that a sector is under-represented. 3.6 In 2012, East Devon had a location quotient above one in six of the nineteen main sectors, with particularly high levels of employment in accommodation and food, construction, and water services, reflecting local employment specialisms and the level of development taking place across the district. 3.7 Agriculture is a significant industry within East Devon. The true employment figures for the sector are not captured in the data below, partly due to high levels of self-employment, and also because the method of data collection for the BRES survey means that agriculture figures are generally considered to be unreliable. 3.8 At the opposite end of the spectrum, there are several sectors which continue to be under-represented. This includes key private service sectors which are not typically dependent on local demand and expenditure, such as professional, scientific and technical activities, information and communication, finance and insurance and administration and support. In these sectors employment levels in East Devon are as low as half of the national average. The scale of these sectors also makes a significant contribution to the district’s overall employment gap.
8 East Devon Area Profile
Employment by Sector, 2012 Ranked by Size Ranked by Concentration Sector No. % Sector LQ Wholesale & retail 8,800 21% Accommodation & food 1.79 Health & social work 5,300 12% Construction 1.70 Accommodation & food 5,200 12% Utilities: water 1.51 Education 3,700 9% Other services 1.45 Construction 3,200 7% Transport & storage 1.41 Manufacturing 2,900 7% Wholesale & retail 1.28 Transport & storage 2,800 7% Health & social work 0.96 Prof., scientific & tech. 2,100 5% Arts & entertainment 0.95 Public admin 1,800 4% Real estate 0.91 Admin & support 1,700 4% Education 0.89 Other services 1,200 3% Public admin 0.87 Info & comms 1,000 2% Manufacturing 0.78 Arts & entertainment 1,000 2% Prof., scientific & tech. 0.64 Finance & insurance 800 2% Utilities: electric & gas 0.59 Real estate 600 1% Info & comms 0.59 Utilities: water 400 1% Agriculture 0.51 Agriculture 100 0% Finance & insurance 0.49 Utilities: electric & gas <100 0% Admin & support 0.46 Mining <100 0% Mining 0.22 Source: Business Register and Employment Survey
3.9 When a more detailed sector definition is used (2 Digit Standard Industrial Classification), the concentrations and specialisms within East Devon become more apparent. In particular, the analysis shows that: Levels of employment in air transport are almost nine times the national average, reflecting the presence of Exeter International Airport; The popularity of East Devon (especially Exmouth) for tourists contributes to the high representation of the accommodation sector in the district, with employment levels over three times the national average. Exmouth is home to numerous hotels and bed and breakfasts, as well as the Devon Cliffs Holiday Park. The food and beverage sector is also highly represented. The high levels of employment construction is driven by all sub-sectors being highly represented including civil engineering, specialised construction activities and the construction of buildings. Residential care activities is a significant employment sector, despite overall employment levels in the health and social work sectors being slightly lower than the national average. This reflects the age profile of the population, with a high proportion of residents aged 65+. Employment Specialisms, 2012 Sector No. LQ Air transport 1,200 8.93 Accommodation 1,900 3.21 Civil engineering 800 2.58 Residential care activities 2,200 2.03 Activities of membership organisations 600 1.74 Specialised construction activities 1,600 1.57 Construction of buildings 800 1.48 Retail 6,300 1.46 Food & beverage service 3,300 1.42 Other personal service 600 1.36 Source: Business Register and Employment Survey
9 East Devon Area Profile
The Business Base 3.10 With almost 5,400 active businesses in 2012, the scale of the business base is one of East Devon’s key strengths. With 72 businesses for every 1,000 working age residents, East Devon had the second highest business density in the county and also exceed the regional and national average. Business Density, 2012 – Businesses per 1,000 working age residents
80
70
60
50
40
30
20
10
0 East Devon Devon South West England
Source: Business Demography 3.11 Further analysis shows that this high business density is driven primarily by strong survival rates relative and a reasonably high level of start ups. 3.12 In 2012, East Devon’s start up rate was 8.4%, with 455 business births that year. While this was the second highest start up rate in county, it fell short of regional and national figures of 9.8% and 11.6% respectively. For East Devon to reach national levels, an additional 170 business births would have been required (an uplift of 37%). Business Start Up Rate, 2012 – Births as % of active businesses
14%
12%
10%
8%
6%
4%
2%
0% England South West East Devon Devon
Source: Business Demography 3.13 In terms of survival rates, of those businesses that were set up between 2007 and 2009, up to 70% have survived for three years, compared to 63% nationally and 67% across the county.
10 East Devon Area Profile
Three Year Business Survival Rates by Business Birth Year
80% 70% 60% 50% 40% 30% 20% 10% 0% 2007 2008 2009 East Devon Devon England
Source: Business Demography
Real Value Added 3.14 Value added is typically used to provide a measure of an area or sector’s economic contribution. It can be measured in gross or real terms, with the latter eliminating the effects of inflation and basing the value of output on the prices of a fixed year3. 3.15 While data is not available at the district level through the Regional Accounts produced by the Office for National Statistics (ONS)4, estimates produced by the Cambridge Econometrics’ Local Economic Forecasting Model provide an indication of district level performance. This section draws upon the model’s 2012 data to ensure consistency with the employment and business data. Of note, the sector definitions in the model vary from those used in standard datasets. 3.16 The model estimates that East Devon generated £1,681m of real value added in 2012, accounting for 14% of total value added in Devon. This is slightly lower than the district’s share of employment (15%) reflecting the relative productivity levels of the district.
Productivity 3.17 For the purpose of this report, productivity is measured as the level of real value added per employee. As with many parts of the South West, productivity has been a long term challenge for the Devon economy. This is also the case in East Devon, where £30,562 of value added was generated per employee in 2012. This ranked as the fourth lowest level in Devon, falling short of the county-wide average and equivalent to just 80% of the national average. If productivity levels were to match the national average, an additional £425m of value added would be generated per annum. 3.18 The productivity challenge which East Devon faces is clearly highlighted by sectoral productivity levels. Overall, there are two main ways in which sector performance currently contributes to the below average levels of productivity in East Devon: Sector performance: In 2012, the productivity levels of all but one of the twelve major sectors in East Devon were below the national average. The extent of the disparity varied significantly by sector, ranging from the productivity of the information and communications sector being equivalent to just 65% of the national average to transport and storage reaching 96%. The relative productivity levels of the business and finance and manufacturing sectors were also particularly low.
3 In the case of the LEFM, data on real value added is based on 2009 prices 4 This smallest geography for w hich this is available is NUTS3 (i.e. Devon)
11 East Devon Area Profile
Sector mix: Several of the sectors which are highly represented in East Devon in employment terms typically generate lower levels of value added, including accommodation and food and distribution. In 2012, the productivity levels of each of these sectors were below the district-wide average. In contrast, sectors with higher levels of productivity, including information and communications continue to be under- represented in Devon in employment terms. Productivity By Sector (value added per employee) 2012 Sector* £ Sector % of UK Agriculture 141,818 Public sector 105% Utilities 96,200 Transport &storage 96% Manufacturing 42,677 Other services 95% Info & comms 41,923 Accommodation & food 94% Construction 36,862 South West Sector Average 88% Transport & storage 35,118 Distribution, hospitality 87% South West Sector Average 33,696 Utilities 86% Business and finance 33,194 Agriculture 85% Public sector 32,558 Construction 84% Devon Sector Average 31,897 Devon Sector Average 83% East Devon Sector Average 30,562 Manufacturing 81% Distribution, hospitality 25,632 East Devon Sector Average 80% Other services 24,931 Business & finance 68% Accommodation & food 17,180 Info & comms 65% *Excluding mining because employment=0 Source: Cambridge Econometrics LEFM
Occupational Profile 3.19 Highly skilled occupations are commonly defined as the top three occupational groups – managers and senior officials; professional occupations; and associate professional and technical occupations. 3.20 East Devon is the highest performing on this measure out of all of the Devon districts, and one of only two districts in Devon to out-perform the national average. In 2013, 48% of all occupations were classed as highly skilled, exceeding the county wide average of 38% and the national average of 45%. 3.21 This strong performance was driven by a high level of managerial and professional occupations, which more than compensates for the shortfall of associate professional occupations when compared to the county-wide and national profile. % of Highly Skilled Occupations, 2012/13 (as a proportion of all occupations) 25%
20%
15%
10%
5%
0% Managers Professionals Associate Professionals
East Devon Devon England
Source: Annual Population Survey
12 East Devon Area Profile
3.22 The remainder of East Devon’s overall occupational profile varied from both Devon and national profiles. The main areas of variation were a high representation of administration and secretarial and caring and leisure occupations, while all other occupations, and particularly sales and customer service, are under-represented in comparative terms. % of Occupations, 2012/13 (as a proportion of all occupations)
16% 14% 12% 10% 8% 6% 4% 2% 0% Admin and Skilled Caring and Sales and Process, Elementary Secretarial Trades Leisure Customer Plant and Service Machine East Devon Devon England
Source: Annual Population Survey
Average Earnings 3.23 The high representation of highly skilled occupations does not however translate into high wages in the district, with average annual workplace earning equivalent to just 87% of the national average. This is a reflection of the sectoral profile of the district’s employment base, with a high proportion of the managers likely to work in sectors which are typically lower paid (such as accommodation and food). 3.24 The average annual resident based earnings are over £2,000 greater than the equivalent workplace figure, reflecting the large numbers of workers (7,100 as of the 2001 Census5) commuting to other districts, especially Exeter. While resident based figures significantly exceed those in other parts of the county, they continue to be lower than the national average. Average Gross Annual Earnings, 2012 East Devon % of Devon % England Workplace based 19,241 101% 87% Resident based 21,393 112% 96% Source: Annual Survey of Hours and Earnings
5 2011 Census figures on travel to work patterns are yet to be released
13 East Devon Area Profile
4 Economic Forecasts
Key Messages The growth projections for East Devon are very positive, with the district forecast to experience the highest proportionate increase in employment and the third highest increase in real value added. On both indicators, growth is expected to outpace both the regional and national average. In particular, the construction sector is forecast to drive employment growth, while value added growth is expected to be balanced across a number of sectors, including significant increases within construction, business and finance and the public sector. While productivity is forecast to rise, relative productivity levels will remain a challenge, with projections showing that they will continue to be equivalent to just 80% of the national average by 2025. It is important to note that these forecasts do not include all of the employment and real value added benefits that will arise from the Exeter and East Devon Growth Point. East Devon’s performance against each of the key indicators covered in this chapter is summarised in the table below.
UK Change 2013 - Change 2020 - Overall Change East Devon Comparison 2020 2025 2013 - 2025 2013 - 2025
LA Name Employment 6.2% 4.3% 10.7% 6.9% Source: LEFM
Real Value Added 17.4% 11.6% 31.0% 27.1%
Source: LEFM
Productivity 10.6% 7.0% 18.3% 18.9% Source: LEFM
The Local Economic Forecasting Model
4.1 This section of the profile summarises the economic forecasts for East Devon as set out in the latest version (November 2013) of the Cambridge Econometrics’ Local Economy Forecasting Model (LEFM). The model provides locally tailored projections across a wide range of indicators, including value added and employment and allows district level forecasts to be benchmarked against those of Devon, the South West and the UK. The forecasts are updated on a quarterly basis. 4.2 While economic forecasts provide a useful indication of the future prospects of local areas, it is important to recognise that they are projections and that they are subject to change based on the range and complexity of the underpinning assumptions. 4.3 Further, the forecasts do not take account of the impact of new policy interventions (such as the Exeter and East Devon Growth Point) that may be implemented over the forecast period, such as the development of new employment sites and delivery of business support and skills programmes, which have the potential to alter the scale and nature of economic growth. As such, the forecasts largely present the ‘policy off’ situation. However, as they take account of historic performance, including policy at the time, it is not possible to generate a truly policy off scenario.
14 East Devon Area Profile
4.4 It should also be noted that the modelled numbers produced can vary from those produced through standard datasets and that data may not be directly comparable (e.g. employment in the LEFM includes self employment, while this is excluded in the Business Register and Employment Survey). However, headline trends and relative performance remain consistent.
The Outlook for the UK and Devon
4.5 Forecasts for the UK are positive and suggest that the economic recovery is beginning to gather pace, with particular improvements forecast from 2015 onwards, when the average annual growth rates for both employment and value added will increase from the 0.5% and 1.5% forecast for 2013-2015, to 0.6% and 2.2% respectively. 4.6 While these increases are good news for the UK economy, it is important to note that even the higher growth forecasts from 2015 onwards will remain below peak levels of growth witnessed pre-recession (1.2% per annum for employment between 2000 and 2005, and 3.2% per annum for GVA between 2005 and 2011). 4.7 The headline message for Devon mirrors that of the UK, with growth forecast across a number of indicators, particularly from 2015 onwards. Again, growth will not reach the peak levels witnessed previously and, unlike in the last growth cycle, Devon’s growth is not projected to significantly outpace the national average.
Employment
4.8 Between 2013 and 2025, East Devon is projected to experience the highest proportionate employment increase of Devon’s districts (11%) outpacing both the regional and national average. Unlike patterns in other districts, employment growth is projected to outpace the regional and national average in both parts (2013-2020 and 2020-2025) of the forecast period. 4.9 The projected growth will create an additional 5,900 jobs - the second highest net increase forecast across Devon’s districts. Overall, East Devon’s share of total employment in Devon is expected to remain static between 2013 and 2025. Employment Change, 2012 Employment Net Change % Change 2013- 2020- 2013- 2020- Area 2013 2020 2025 2020 2025 2020 2025 East 55,000 58,400 60,900 3,400 2,500 6% 4% Devon Devon 375,400 394,100 408,600 18,700 14,500 5% 4% SW 2,795,500 2,897,600 2,983,400 102,100 85,800 4% 3% UK 32,332,200 33,503,600 34,565,900 1,171,400 1,062,300 4% 3% Source: Cambridge Econometrics LEFM
Real Value Added
4.10 The level of value added growth in East Devon is forecast to significantly exceed employment growth between 2013 and 2025 resulting in an additional £524m of real value added per annum by 2025. With a projected increase of 31%, East Devon is forecast to experience one of the highest real value added uplift of the Country’s districts, significantly outpacing the regional and national average (27% in both cases). The dynamics driving these trends are explored within the sectoral analysis in the following sections.
15 East Devon Area Profile
Real Value Added, 2012 Real Value Added (£m) Net Change % Change 2013- 2020- 2013- 2020- Area 2013 2020 2025 2020 2025 2020 2025 East Devon 1,691 1,985 2,214 294 229 17% 12% Devon 12,005 13,789 15,308 1,785 1,518 15% 11% SW 94,861 108,672 120,451 13,810 11,7789 15% 11% UK 1,238,540 1,417,753 1,573,965 179,213 156,212 14% 11% Source: Cambridge Econometrics LEFM
4.11 Overall, as with employment, East Devon’s share of total value added in Devon is expected to remain static between 2013 and 2025.
Productivity
4.12 Devon’s long term challenge of productivity is evident within each of the districts and this is forecast to continue between 2013 and 2025. While productivity is forecast to rise across all districts and reach £36,356 of value added generated per employee in East Devon by 2025, performance against the national average is expected to vary. 4.13 East Devon is one of three districts where the relative position is forecast to remain static. As such it is expected that by 2025, productivity levels will continue to be just 80% of the national average and the level of value added generated per employee will be the fourth lowest of Devon’s districts. Productivity, 2013-2025 (value added per employee) £50,000 £45,000 £40,000 £35,000 £30,000 £25,000 £20,000 £15,000 £10,000 £5,000 £0 East Devon Devon UK 2013 2020 2025
Source: Cambridge Econometrics LEFM Sectors – Forecast Absolute Growth 4.14 The majority of sectors in East Devon’s economy are forecast to grow or remain relatively static in both employment and real value added terms between 2015 and 2025. The construction sector is expected to make the largest contribution to growth, accounting for 53% of additional jobs and 28% of the real value added uplift. The construction employment increase is forecast to be five times higher than the increase of any other sector. 4.15 While the employment forecasts for East Devon show a high level of dependence on the construction sector, the real value added forecasts are based upon more balanced growth across a number of sectors, including significant increases within business and finance and the public sector.
16 East Devon Area Profile
Net change, 2013-2025 – Ranked by greatest level of change Employment Real Value Added (£m) 2013- 2020- 2013- 2013- 2020- 2013- Sector Sector 2020 2025 2025 2020 2025 2025 Construction 2,100 1,000 3,100 Construction 93.5 51.8 145.3 Accommodation & food 300 300 600 Business & finance 54.8 48.9 103.7 Business & finance 400 200 600 Public sector 16.9 36 52.9 Info. & comms. 300 100 400 Transport & storage 32.3 18.4 50.7 Transport & storage 200 200 400 Distribution, hospitality 27.7 20.2 47.9 Distribution, hospitality 300 100 400 Manufacturing 22.3 16.2 38.5 Public sector -100 400 300 Info. & comms. 18.2 13.1 31.3 Other services 200 100 300 Accommodation & food 14.7 11.4 26.1 Utilities 0 100 100 Other services 10.3 7.8 18.1 Mining 0 0 0 Agriculture 2.5 3.4 5.9 Agriculture -100 0 -100 Utilities 1.2 1.9 3.1 Manufacturing -100 -100 -200 Mining 0 0.1 .1 Source: Cambridge Econometrics LEFM
4.16 Other key points to note include: The role which sectors play in driving growth will vary: There are a number of key differences between the sectors which will drive job creation and those which will make a greater contribution in value added terms reflecting varying productivity levels. In particular, accommodation and food will be a key employment creation sector (with low levels of value added growth), while the public sector will make a more significant contribution to value added growth than employment growth. The manufacturing sector will also make a contribution to real value added growth despite employment decline. The timing of employment growth will vary by sector: Five of the eleven sectors, and particularly construction, are expected to make a more significant contribution to employment growth between 2013 and 2020, while the public sector is expected to play a greater role between 2020 and 2025. Similar differences are also projected in the timings of value added growth, although the variances are often not as stark, with forecast productivity gains helping to balance growth. Sectors – Forecast Growth Rates 4.17 The high levels of employment and real value added growth forecast for East Devon are driven by the projected growth rates for most sectors exceeding the national average. With regards to employment, the level of decline forecast for the manufacturing sector is also expected to be lower than the national average. Growth Rates, 2013-2025 – ranked by fastest growing Employment Real Value Added East East Sector UK Sector UK Devon Devon Construction 55% 19% Construction 71% 33% Info. & comms. 29% 17% Info. & comms. 53% 46% Utilities 20% 13% Business & finance 43% 38% Transport & storage 12% 9% Transport & storage 41% 21% Accommodation & food 10% 16% Manufacturing 29% 22% Other services 10% 9% Accommodation & food 25% 30% Business & finance 8% 12% Other services 25% 24% Distribution, hospitality 4% 3% Mining 20% 8% Public sector 2% 4% Distribution, hospitality 19% 15% Agriculture -5% -5% Agriculture 17% 12% Manufacturing -6% -11% Public sector 13% 20% Mining - -7% Utilities 6% 9% Source: Cambridge Econometrics LEFM
17 East Devon Area Profile
Sectoral Productivity
4.18 While productivity levels are expected to increase across all but one of East Devon’s sectors (utilities) between 2013 and 2025, the change in the relative position of each sector against the UK will vary. Specifically the productivity gap is forecast to: Reduce in six sectors: (transport and storage, accommodation and food, distribution, agriculture, manufacturing and business and finance) by up to 14 percentage points; Decrease in five sectors: (public sector, other services, utilities, construction and information and communication) by up to 7 percentage points. 4.19 In particular, the significant levels of improvement forecast for transport and storage and business and finance, help to compensate for the deterioration in other sectors resulting in overall productivity levels of East Devon remaining relatively static. Transport and storage is forecast to become the only sector which out-performs equivalent levels of productivity nationally by 2025.
Productivity By Sector, 2013-2025 2013 2020 2025 Sector* £ % UK £ % UK £ % UK Public sector 31,614 103% 33,145 100% 34,830 99% Transport & storage 36,294 96% 43,250 107% 45,816 110% Other services 25,103 96% 26,806 95% 28,406 95% Accommodation & food 17,879 95% 19,410 94% 20,281 96% Utilities 95,400 87% 97,800 92% 84,667 80% Distribution, hospitality 25,847 86% 27,822 87% 29,529 88% Construction 36,482 85% 38,675 85% 40,184 84% Agriculture 17,100 84% 19,316 88% 21,105 88% Manufacturing 42,613 81% 51,467 82% 58,828 82% East Devon Total 30,738 80% 33,986 80% 36,356 80% Business & finance 33,219 68% 38,610 71% 43,823 73% Info. & comms. 41,929 68% 45,235 65% 50,000 64% South West 33,934 89% 37,504 89% 40,734 89% *Mining excluded because employment=0 Source: Cambridge Econometrics LEFM Sectoral Profile
4.20 Overall, despite the changes outlined above, the sector profile of the East Devon economy is forecast to remain largely unchanged in both employment and real value added terms. The high levels of employment growth forecast for construction are however expected to increase the sector’s share of total employment, causing the overall contribution of other sectors, including distribution and the public sector to decrease.
18 East Devon Area Profile
5 What are the Implications for East Devon?
Key Strengths A Well Connected District with an Attractive Residential Offer
5.1 East Devon is one of the best connected districts in the county and benefits from its close proximity to Exeter and the presence of Exeter International Airport which offers domestic and international flights and supports 2,000 jobs locally. In addition, the mixed urban-rural offer and the attractive natural environment contribute to its popularity and role as Devon’s largest population centre, particularly amongst retirees. The scale of the population generates spending power within the local economy, and creates demand for local services. An Established Business Base, supported by High Levels of Enterprise
5.2 Micro businesses form the core of the business base, contributing to East Devon having the second highest business density in the county. The business base is also supported by high levels of self employment, suggesting a strong entrepreneurial culture. The dominance of small employers means that the economy should be less vulnerable to the impact of business closures which can be severe in areas with high dependence on single employers. Given the business structure, it is important to consider how small businesses (including those run by a sole trader) can be supported to grow their operations and create new employment opportunities. Strong Growth Prospects
5.3 The growth projections for East Devon are very positive, with the district forecast to experience the highest proportionate increase in employment and the third highest increase in real value added. While the employment increase is heavily concentrated in the construction sector, a range of opportunities will be created across the majority of sectors, generating additional local job opportunities. Further, they do not take account of the full impact of the Exeter and East Devon Growth Point, which will lead to a greater diversity amongst the new job roles and the district’s economy more widely. Making the Most of Growth Point Opportunities
5.4 Growth Point Funding is a significant opportunity for East Devon. The scale of the resource is considerable and provides opportunities to generate thousands of jobs to boost the local economy. Ensuring the conditions are created to take full advantage of this opportunity will be key, including providing deliverable sites, a construction workforce of sufficient scale and working to secure occupiers in the medium terms. Delivery of the Growth Point initiates has the potential to increase overall employment numbers and support the diversification of the economic base, create new communities, and deliver environmental benefits. Key Challenges Attracting and Retaining Working Age Residents 5.5 Despite being the largest population centre in the county, East Devon has a very small working age population. Currently, just 56% of the district’s population are of working age compared to 64% nationally, and with forecasts for the population to age, this issue will increase in importance. This places an imperative upon attracting and retaining working age residents, based on the area’s attractive residential offer, including the new communities that are being created through the Growth Point. Expanding the employment base and offer will also help to attract younger residents that wish to live near to their place of work.
19 East Devon Area Profile
Increasing Local Employment opportunities and Reducing Dependence on Surrounding Economies 5.6 Despite being the second largest employment base in Devon, the number of employment opportunities is lower than would be expected for an economy of this size.The low number of jobs available relative to the size of the working age population and the areas strong links to surrounding economy, contributes to high levels of out-commuting, particularly to Exeter. Whilst this trend ensures that residents have access to a wider range of employment opportunities, it means that the performance of the East Devon economy is closely tied to the health of neighbouring economies and increases its vulnerability to economic stresses in other areas. Building the local employment base, including through employment growth forecast in the area, will help reduce this challenge. Increasing the Quality of Local Employment Opportunities 5.7 Despite East Devon having the highest concentration of highly skilled occupations in the county and being one of only two districts which exceeds the national average on this indicator, this does not translate into high wages, with average annual workplace earnings equivalent to just 87% of the national average. This reflects the sectoral profile of the district’s employment base, with a high proportion of managers likely to work in sectors which are typically lower paid. A focus on attracting and capturing a larger share of growth in higher value sectors is therefore a priority. This also needs to be supported by initiatives to ensure that the working age population of Devon are appropriately skilled to meet the needs of such employers, including increasing the proportion of people with higher level skills at NVQ L4+. Closing the Productivity Gap 5.8 At present, East Devon has the third lowest productivity levels in Devon with real value added per employee equivalent to just 80% of the national average. Despite positive growth forecasts, the relative levels of productivity are forecast to remain static and this under-performance will continue. While the realisation of Growth Point opportunities may help to ameliorate this, other active measures are required to increase productivity levels of the existing workforce.
20 East Devon Area Profile
Annex 1: Summary Table Data Sources
Indicator Source Date Employment BRES 2012 Businesses Business Demography 2012 Real Value Added LEFM 2012 Population Mid-year Population Estimates 2012 Employment Rate BRES Mid-year Population Estimates 2012 Unemployment Rate Annual Population Survey Oct 2012-Sep 2013 Mid-year Population Estimates 2012 Inactivity Rate Annual Population Survey Oct 2012-Sep 2013 Mid-year Population Estimates 2012 NVQ L2+ Annual Population Survey Oct 2012-Sep 2013 Mid-year Population Estimates 2012 NVQ L4+ Annual Population Survey Oct 2012-Sep 2013 Mid-year Population Estimates 2012 Employment Density BRES 2012 Mid-year Population Estimates 2012 Business Density Business Demography 2012 Mid-year Population Estimates 2012 Productivity LEFM 2012 Highly Skilled Annual Population Survey Oct 2012-Sep 2013 Occupations Average Annual Annual Survey of Hours and 2012 Workplace Earnings Earnings Employment Forecasts LEFM - Real Value Added LEFM - Forecasts Productivity Forecasts LEFM -
21